Dividend Growth ETFs to the Rescue Amid Rising Coronavirus Cases
The coronavirus crisis is getting severe by the day in the United States, with the single-day high of 67,417 new coronavirus cases reported on Jul 14. In fact, a closely observed model is now predicting 224,000 deaths related to coronavirus in the United States by Nov 1, which is 16,000 more deaths than the prediction made last week, per a CNN report. In order to fight the rising number of cases, states like California, Texas, Florida, Los Angeles, San Diego and Oregon along with others have halted or rolled back the reopening process. California, for instance, is closing down all indoor restaurants, wineries, movie theaters, zoos, museums and bars, per a CNN report.
Considering the halting of the reopening process in around a dozen states in the United States, Goldman Sachs has revised its growth estimates downward for the U.S. economy for the third quarter of 2020, per a Bloomberg article. Going by the article, the economy is expected to see 25% growth in the third quarter in comparison to 33% predicted previously. Consequently, the U.S. economy is expected to fall 4.6% in 2020 as against 4.2% forecasted previously, per the article. In this regard, the economists commented that, “combination of tighter state restrictions and voluntary social distancing is already having a noticeable impact on economic activity” (according to the Bloomberg article).
Notably, the outbreak has caused an unprecedented collapse of economic activities as governments had to shut down commerce and implement social-distancing measures in an effort to contain the spread of the virus. The halting or rolling back of the reopening process may hurt investor sentiments and optimism around economic recovery in the near term.
Dividend Growth ETFs for a Healthy Portfolio
The appeal of dividend ETFs has been rising in the face of easing monetary policy on the global front, market uncertainty triggered by the pandemic and deceleration in global growth. This is because dividend-paying securities are major sources of consistent income for investors when returns from equity markets are uncertain.
Although there are plenty of options in the dividend ETF world, ‘dividend aristocrats’ or ‘dividend growers’ could be the smartest way to deal with the current market turmoil. Investors mostly face difficulty in choosing between high-dividend paying ETFs and divided growth ETFs.
Research has shown that in the shorter run, during turbulent market times, the sustainability of dividends becomes a major criterion as a lot many companies are observed to be cutting or suspending their dividend payouts. Interestingly, a comparison of the median values of the S&P 500 Dividend Aristocrats and the High Dividend Index on a number of fundamental metrics that measure the strength of companies making dividend payouts from December 1991 to April 2020 revealed that the former are comparatively safer. Going on, the S&P 500 Dividend Aristocrats turned out to be having larger market caps, more profitability with higher buybacks, cash on hand and earnings than their high yielding peers.
Here are a few ETFs to consider:
Vanguard Dividend Appreciation ETF VIG
This is the largest and most popular ETF in the dividend space, with AUM of $43.68 billion. The fund follows the NASDAQ US Dividend Achievers Select Index, which is composed of high-quality stocks with a record of raising dividends every year. It charges 6 basis points (bps) in annual fees. VIG carries a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read: Worst Market Drop in About Two Weeks: ETF Strategies to Win).
iShares Core Dividend Growth ETF DGRO
This fund provides exposure to companies boasting a history of sustained dividend growth by tracking the Morningstar US Dividend Growth Index. The fund has AUM of $10.87 billion. It charges 8 bps in fees per year and has a Zacks ETF Rank of 2, with a Medium-risk outlook (read: A Quick Guide to Dividend Aristocrat ETFs).
ProShares S&P 500 Dividend Aristocrats ETF NOBL
This product provides exposure to high-quality companies that have not just paid dividends but have hiked the same for at least 25 consecutive years, with most doing so for 40 years or more. It follows the S&P 500 Dividend Aristocrats Index. NOBL has amassed $5.91 billion in its asset base. It has an expense ratio of 0.35% and a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook (read: Dividend Growth ETFs To Fight Second Wave Of Coronavirus Fears).
First Trust Rising Dividend Achievers ETF RDVY
This fund lends exposure to a diversified portfolio of companies with a stellar dividend payout history. It tracks the NASDAQ US Rising Dividend Achievers Index, charging investors 50 bps in annual fees. The ETF has accumulated $1.20 billion in its asset base. It carries a Zacks ETF Rank of 3, with a Medium-risk outlook.
Invesco Dividend Achievers ETF PFM
With $362.7 million, this fund offers exposure to companies that have raised dividends for 10 or more straight fiscal years. It has an expense ratio of 0.54%. PFM is a Zacks #3 Ranked ETF, with a Medium-risk outlook.
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iShares Core Dividend Growth ETF (DGRO): ETF Research Reports
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
ProShares SP 500 Dividend Aristocrats ETF (NOBL): ETF Research Reports
Invesco Dividend Achievers ETF (PFM): ETF Research Reports
First Trust Rising Dividend Achievers ETF (RDVY): ETF Research Reports
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